Gundlach: Bonds Not A ‘Terrible’ Idea Yet, In ‘Eighth Inning’

By Michael Aneiro

A day after speaking at the Sohn investing conference, DoubleLine’s Jeff Gundlach finds himself in front of a CNBC TV camera early Thursday afternoon. Some of Gundlach’s thoughts on bonds:

Everything begins and ends with quantitative easing…. It creates demand for Treasury bonds and is keeping the trend toward anything with a yield on it being a successful investment and continuing to go higher… It creates an investor conundrum… At some point its going to end, probably badly.

Gundlach added that “we’re in about the eighth inning now” of QE’s effects on bond markets.

It depends what your timeframe is. Is your timeframe 10 or 15 years? We should all hope they represent a bad idea over (10 or 15 years)…. But over the short term, say 12-18 months, they will not be a terrible investment…. The trend is in place where you can get mid to high single digit [returns] with bonds that have credit risk and have some kind of yield on them.

Gundlach noted that the iShares Trust Barclays 20+ Year Treasury Bond Fund (TLT), a proxy for long-dated Treasuries and the investment he says “everyone loves to hate,” has returned about 3.5% annualized. “That’s not great, but it’s not bad, and I think that’s going to continue.”

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MAY 9, 2013 5:07 P.M.

Amit Kumar Khaitan wrote:

I'd say that there is too much of optimism on reaching the previous lows and previous highs. Better than most things would be to pick and choose HY bonds and play on the spread alone by shorting treasury futures. As I just read in one of the articles, the spread is 4.24% for HY, so if you pick and choose, yoou can do better than that with what I believe will be much lower initial investment. Does this make sense?